Despite NAND glut, IM Flash Tech to push capacity expansion plans

Despite horrible market conditions that have decimated the average selling prices (ASPs) of NAND flash memory chips over the past few months, IM Flash Technologies LLC, the NAND joint-venture between Intel Corp. and Micron Technology Inc., will push ahead with its aggressive capacity expansion plans, the head of Intel's flash memory group disclosed recently.

"We think that—long term—this is a business that people will make money in," said Brian Harrison, vice president and general manager of Intel's flash memory group.

The pricing environment for NAND is currently "brutal," Harrison acknowledged, but said Intel is "in it for the long term." That said, Harrison added that the company continues to study the business climate and would pull back from its capacity expansion plans if conditions continue to deteriorate.

IM Flash, created in January 2006, already has a working 200mm fab in Boise, Idaho. A 300mm fab in Manassas, Virginia, is said to be rapidly ramping, while a 300mm fab in Lehi, Utah, produced its first wafers last week, according to Intel. A 300mm fab ticketed for opening in Singapore in 2008 is scheduled to break ground later this month. Harrison touted a strategy that will see the venture bring online roughly one fab per year.

The partners of IM Flash did not disclose the number of wafer starts per month that each fab is capable of. But Randy Wilhelm, VP and general manager of the NAND products group within the flash memory group, said that the Manassas fab is roughly twice the size of the Boise factory, and that the Lehi and Singapore fabs will be about three times its size.

After the companies announced the Singapore fab in November, Joe Unsworth, an analyst with Gartner Inc., warned that the venture's capacity expansion could prolong the pricing pressure on the NAND market. After dropping by some 60 per cent last year, ASPs on NAND parts have continued to plummet rapidly in 2007. Some believe the ASPs on NAND chips will decline 65 per cent this year.

"You have to think about from IMFT's perspective and then you have to think about it from the industry's perspective," Unsworth said in an interview with EE Times. "Intel and Micron are moving aggressively to the next process technology node and next-generation of multi-level cell (MLC) technology right now. That development effort is useless unless they have more capacity behind it. But right now, more capacity is the last thing the industry needs."

The IM Flash investments are part of a larger campaign by Intel to invest more than Rs.13,596 crore ($3 billion) in non-volatile memory technology in 2006 and 2007, according to Harrison. He acknowledged that the joint venture may not see profitability any time soon.

"The profitability is being hampered by the pricing environment and the level of investment we are making to go from a standing start to where we want to be in the next two years," Harrison said.

Unsworth noted that IM Flash is not alone in ratcheting up the NAND capacity. Toshiba Corp. and SanDisc Corp. are currently building Fab 4 while simultaneously expanding Fab 3 at Toshiba's site in Yokkaichi, Japan he added. Samsung Electronics Co. Ltd and Hynix Semiconductor Inc. "appear to be throttling back" on NAND expansion at the moment, he said.

"We do expect that we will see new demand drivers materialise late this year or in 2008 which will soak up a lot of capacity," Unsworth said, noting that Apple Inc.'s forthcoming iPhone will put the spotlight on musical phones, which require storage.

Believing that the current NAND ASP doldrums are a mere blip, Intel and Micron are hoping to cash in on a long-term market for NAND that they believe will make the capacity expansion worthwhile—and then some. Citing various internal Intel and third-party analyst forecasts, Harrison said the total available market for non-volatile memory is expected to grow to Rs.1,81,280 crore ($40 billion) in 2010 from about Rs.90,640 crore ($20 billion) in 2006. Bit growth for NAND parts between 2006 and 2010 is expected to be roughly sevenfold, he said.

As for the near term?

"I'm not going to predict what the pricing environment will be in 2008," Harrison said. "But I think people expect it to get better. It won't stay like it was in the first quarter of 2007."